Built to Thrive (and Sell): Part 2 - Assemble the Right Advisory Team

Selling your business is likely to be one of the most significant and complex decisions you will make in your professional life. It’s a process filled with intricate details, emotional considerations, and potential pitfalls that can diminish value or even derail the transition entirely. Yet, far too many business owners delay building the right team until the eleventh hour or attempt to navigate this challenging journey alone. The reality is the earlier you assemble your exit team, the more options and value you’ll have. This isn't just about having technical experts; it's about building a robust support system – a "Rope Team" – to guide you through the toughest terrain.

Understanding the "Rope Team" Concept

The concept of a "Rope Team," as described in the bestselling book “What’s Within You” authored by ADHS Co-Founder, David Shurna, is about having reliable people who have your back, supporting you emotionally, intellectually, and physically as you strive toward a vision. It’s a powerful metaphor for any challenging journey, including the complexities of selling a business. Building a strong Rope Team is described as critical to overcoming adversities. In the context of a business transition, your Rope Team can include mentors, advisors, other entrepreneurs who have navigated similar paths, and even trusted friends and family. It's essential to embrace the fear of sharing your vision and challenges with others and ask for their expertise.

The foundation of a strong Rope Team is trust. "What's Within You" introduces the BRAVING acronym to illustrate the elements that build trust within a team: Boundaries, Reliability, Accountability, Vault, Integrity, Non-judgment, and Generosity.

• Boundaries involve setting clear expectations and respecting limits.

• Reliability means consistently following through on commitments.

• Accountability is about taking responsibility for mistakes and making amends.

• Vault refers to keeping confidences and not sharing information inappropriately.

• Integrity is acting in accordance with your values and being ethical.

• Non-judgment creates a safe space where you can be vulnerable without fear of shame.

• Generosity involves giving the benefit of the doubt and assuming good intentions, fostering a collaborative spirit.

These BRAVING elements are the "glue" that holds your Rope Team together. Having this foundation of trust and support is crucial when navigating something as challenging as selling your business.

The Professional Advisors: Your Business Transition Rope Team ("Sherpas")

While your personal Rope Team provides crucial emotional support and broader perspectives, navigating the technical and strategic aspects of a business sale requires specialized expertise. These professional advisors act as your "Sherpas," guiding you through the complex landscape of business transition.

A core transition advisory team should include, at a minimum, an attorney, a CPA, a financial advisor, and a growth consultant. These individuals bring distinct skills and insights necessary for a successful exit. In addition to the core team, functional specialists can be added as needed.

Let's break down the roles of these critical team members and how they function as your business transition Rope Team:

1. The Exit Advisor: Your Strategic Quarterback Often overlooked, the Exit Advisor is presented as a crucial member of the team, acting as your "strategic quarterback". If you are considering an exit in the next 2 to 5 years, now is the time to bring on an Exit Advisor. They do far more than just sell your business. They help you:

• Understand all your available exit options, which can range from a strategic sale or private equity deal to an ESOP or internal transfer.

• Align your business structure with your personal, financial, and philosophical goals. Defining what a successful exit looks like for you is the foundational first step.

• Implement the value-building steps necessary to maximize your company's worth, steps that take time to execute effectively.

• Avoid being forced into a reactive or rushed sale if unexpected circumstances arise.

The earlier you engage an Exit Advisor, the better positioned you will be. American Dream Legacy Advisors, for instance, specializes in guiding business owners through succession planning and exit strategies, helping them understand and prepare for the various options.

2. The Attorney: Navigating the Legal Landscape An attorney is a critical part of your core advisory team. Their expertise is essential for navigating the complex legal aspects of a business sale. They will assist with drafting and reviewing contracts, structuring the deal legally, and ensuring compliance throughout the transaction process. Having a trusted legal expert on your Rope Team provides confidence and protection during negotiations and deal finalization.

3. The CPA: Financial Clarity and Optimization Your CPA is another indispensable member of the Rope Team. They play a vital role in ensuring your financials are clean and credible, which is the first step toward maximizing value in the eyes of potential buyers. They help prepare for due diligence by examining tax returns, financial statements, and payroll data. Your CPA also helps you understand the financial performance of your business, including identifying and addressing the Profit Gap – the difference between your current EBITDA and best-in-class EBITDA in your industry. They are essential for optimizing tax planning related to the sale, helping to preserve your wealth and legacy.

4. The Financial Advisor: Connecting Business and Personal Wealth A financial advisor on your core team helps connect the business exit to your personal financial future. They assist in defining your personal "freedom number" – the amount you need from the sale to achieve your post-exit financial goals. They integrate your business transition plans with your overall wealth management strategy, addressing the Wealth Gap – the difference between your current wealth and the wealth needed to fund your future lifestyle. Their role is crucial in ensuring the business sale supports your desired life after the transition.

5. The Growth Consultant / Value Growth Advisor: Building a More Valuable Business This advisor focuses on enhancing the intrinsic value of your business. They help identify and implement strategies to increase the company's current value and potential value, addressing the Value Gap. This includes focusing on growth, scalability, operational excellence, and professionalization – key drivers that can lead to multiples expansion and significantly increase the business's market value over time. They help implement management operating frameworks that increase transparency and accountability, enhancing focus and operational efficiency. By working with a growth consultant, you ensure your business is not just performing well but is actively becoming more attractive and valuable to potential buyers. B2B CFO, for example, lists helping companies grow profitably, increasing company value, and planning strategically as areas of expertise.

Credentialed Expertise: It is recommended that at least one member of your core team holds an exit planning credential, such as the Certified Exit Planning Advisor (CEPA), which signifies training within a structured framework, process, and system.

Extending Your Rope Team with Functional Specialists

Beyond the core team, you may need to bring in additional specialists depending on your specific situation and chosen exit path. These individuals provide expertise for particular facets of the transaction:

• M&A Advisor (Investment Banker or Business Broker): If your plan involves selling to an external third party like a strategic buyer or private equity firm, an M&A advisor is essential for marketing the business, finding potential buyers, and managing the sales process.

• Estate Planning Attorney: While your CPA can advise on tax implications, an estate planning attorney specializes in structuring your assets and legacy outside of the business sale to ensure your wealth benefits the people and causes you care about.

• Insurance and Risk Advisor: De-risking your business is crucial for increasing its value and attractiveness to buyers. An insurance and risk advisor helps identify and mitigate potential liabilities that could impact the sale.

• Commercial Banker: If financing is required for the transaction, such as in the case of a leveraged ESOP, a commercial banker specializing in these types of deals is a vital part of the team.

• Family Business Advisor: Transitioning a family-owned business comes with unique dynamics. A family business advisor helps navigate these complexities, ensuring a smoother process for all involved family members and preserving relationships.

• Other Specialists: Depending on the business and the owner's needs, the team might also include functional specialists like life coaches, executive coaches, marketing consultants, IT or cyber security professionals, or human resources and leadership professionals. These roles can drive both income and value to the company or the business owner. For example, strengthening the organization and back office (including sales, finance, accounting, and marketing) and deploying software/systems are key priorities for longer-term sellers. Fostering a strong company culture through leadership and employee engagement initiatives is also a value enhancer.

Each of these advisors should ideally take a value, not just income, approach to their practice, focusing on how they can enhance the business's worth and the owner's outcome.

The Benefits of Your Business Transition Rope Team

Building and leveraging this comprehensive team offers significant advantages that go far beyond simply facilitating a transaction:

• Maximizing Business Value: Advisors help you focus on key value drivers such as risk reduction, profitability, scalability, and professionalization. They help clean up financials, strengthen management, de-risk the business, and get operations in order, all of which are crucial for commanding a premium valuation. This strategic preparation allows you to unlock greater value through multiples expansion.

• Navigating Complexity and Avoiding Failure: The M&A landscape is complex. Studies indicate a high failure rate for business sale transactions (70%). Furthermore, 50% of owners lose their company to involuntary factors like partner disagreement, stress, death, or disability before even reaching a planned exit. A skilled advisory team helps you navigate the complexities, address potential issues proactively, and avoid becoming a statistic. They provide the guidance needed to make informed decisions throughout the process.

• Addressing Business and Personal Gaps: Advisors help identify and strategize around the Value Gap (current vs. potential company value), Profit Gap (current vs. best-in-class EBITDA), and the owner's Wealth Gap (current wealth vs. needed wealth). By addressing these gaps, the team helps position both the business and the owner for a successful outcome.

• Emotional Support and Accountability: The journey of selling a business is often emotional. Your broader Rope Team, including friends and family, provides emotional support, while the professional advisors offer objective guidance during stressful periods. Sharing your vision and progress with your team can provide accountability and keep you focused.

• Fresh Perspectives and Expertise: Advisors bring external perspectives and specialized knowledge that the owner may lack. This diverse expertise, particularly from those with exit planning credentials, is invaluable in identifying opportunities and mitigating risks you might not see on your own.

• Ensuring Business Continuity: A key aspect of preparing a business for sale is building a strong, professional management team that can operate the company independently of the owner. This ensures stability for customers and staff and makes the business more attractive to buyers. Your advisors help structure this transition and delegate responsibilities effectively.

• Preserving Legacy and Culture: Choosing the right exit path and preparing for the transition involves considering what happens to the company culture and the employees. Advisors can help evaluate potential buyers (like strategic buyers, private equity, or ESOPs) based on how well they align with your vision, culture, and desire for legacy preservation. American Dream Home Services and AD Legacy Advisors, for example, focus on employee ownership (ESOPs) as an alternative that specifically preserves legacy and rewards employees with wealth creation opportunities.

• Preparing for Life After the Business: A significant number of owners (nearly 75%) profoundly regret selling their company within a year. Reasons include loss of identity and purpose, not choosing the right transition partner, and the unintended consequences of certain buyer types like private equity. Your advisory team, particularly your financial advisor and potentially a life coach, can help you define your personal vision for retirement, explore how to integrate professional passions into your next chapter, and navigate the challenges of finding purpose and direction post-sale. Building a strong post-transition plan is essential for fulfillment.

Timing and Action

While 95% of surveyed business owners recognize the importance of a transition strategy, there's a significant disconnect between this belief and taking action. The data suggests it's time to back up that belief with concrete steps, driven by better education and a focus on value acceleration. The 2022 Colorado State of Owner Readiness study observed that using outside resources and an active board of advisors correlate with better planning and preparation. Don't wait until the last minute to build your team. The best time to start planning your exit was yesterday; the second-best time is today.

In Conclusion

Selling your business is not a solo endeavor. It requires a dedicated team of advisors who act as your professional "Rope Team," guiding you through every step of the journey. This team, starting with a core group of a CPA, attorney, financial advisor, and growth consultant, ideally led by an Exit Advisor, and supplemented by functional specialists as needed, helps you prepare financially, operationally, and strategically. By assembling the right team early, you not only maximize the value of your business and navigate the complexities of the sale but also ensure the transition aligns with your personal vision, preserves your legacy, and positions you for a confident and fulfilling next chapter. It's about making sure that your business transition is successful not just in terms of the deal, but for your future and the future of the business you built. Take action today and start building your dream exit team.

📘 Next in the Series: In Step 3, we'll tackle one of the most overlooked—but potentially most valuable—parts of preparing for a sale: tax and estate planning.

Until then, Will Petter Certified Exit Planner and Co-Founder, ADHS